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Tuesday, 25 August 2009

Optimising a health system

It could be argued that the state has no place involving itself in healthcare. And I have sympathy with that view. Government should focus first on its primary responsibilities such as justice and national defence. But many governments are involved in healthcare; and the promise to deliver health will attract votes in a democracy. So here are my thoughts of how I think government involvement could be useful and deliver good, cost contained (for the government) healthcare. This is based on my ideas in the previous post.

I think that people should be responsible for their own health care including funding.

I think the proportion of people needing reasonable funding at some stage in their life means the concept of sharing risk via insurance for most illness is meaningless.

I think if people do not take care of their health, they will likely still get care and others will advocate for them; but there will be costs that someone has to cover.

The second point means that individuals each need to save roughly the average amount of money spent per person in their lifetime. If most people use a moderate amount of money in health and that is say $200,000 on average, then every person should be encouraged to save, say, $400,000 over their lifetime, much of which will be used in their later years.

The third point is important because the situation occurring as the result of people making bad decisions will be used to argue for socialised government in the name of caring.

I think the Singaporean system, or a model based on it, is worth considering.

My proposal is essentially: government enforced compulsory health saving. Because under this proposed system the government will remove itself from the funding, there will be a decreased requirement for tax monies; and the savings will be cost neutral for the individual. The basic rules would be:

All workers are to pay 5% of their income into an individual, managed, low-risk health account.

There is a tax cut of the same amount so individuals have the same take home pay.

Employers are not required to give any money toward their employees account, nor can unions force this issue. This prevents people being locked into jobs because of the health benefits.

The money is yours, it cannot be taken by the government, it can be passed on in a will at death to other healthcare accounts, hospitals or medical research; or possibly as cash to the beneficiaries of the will.

Compulsory insurance is paid from the account to cover rare, unexpected, high-cost events (eg. kidney failure requiring life long dialysis).

You can use your account to pay healthcare costs. The potential healthcare and the costs are determined by government; that is, both what you can get medically and the maximum amount you can pay. It would include doctor, nurse, hospital visits, etc. It would include prescription and immunisation costs. It would cover dental care.

You can only cover your own and your dependants healthcare costs.

You can purchase a higher level of care, or medical services outside normal practice, but this is unable to come from your healthcare account.

All provision is by private providers who can charge what they will, though adequate competition should keep costs down.

This solution intends to do several things. It means that people pay for their own medical care which, while being somewhat unpredictable, is able to be planned for. It intends to minimise government actually paying for individual health. It prevents people making poor decisions from becoming an unsustainable financial burden. It doesn't add to the burden of employers who do not have a responsibility to the personal health of their workers other than the provision of a safe work environment. Of course employers are free to offer benefits as they wish as part of valuing employees, but there is no financial incentive to do so, nor the need to increasingly complicate tax law. It limits other family members from pressuring individuals to pay for their care. It still allows people to purchase any extra healthcare they wish as money allows (unlike the Canadian system).

There are problems. It does not deal to those who are not employed. It does not deal well with congenital conditions. It does not cover visitors to the country such as tourists. And it does not offer a solution as to how a different system can be transitioned to this. But with medical costs increasing rapidly because of new and better diagnostic and treatment modalities, it is impossible for governments to sustain future expenditures. And when individuals see how much an intervention really does cost, then they may consider whether the benefit is worth it.